Article excerpt

JUST one year ago, Canadian health care was being held up as a
model, of sorts, for what many believed the American system should
look like.

Now, as Congress gets set to slim down Medicare spending, it's
useful to take a look at just what has happened in Canada.

In Alberta, Premier Ralph Klein and his Liberal Party are
seeking to sell to the private sector many of the government-run
hospitals that are closing because of budget cuts. A number of
doctor groups have stepped forward to buy hospitals in order to
provide surgical services, not to Canadians, but to Americans.

In Saskatoon, meanwhile, Reform Party leader Preston Manning
called for a national debate on his party's proposal to split
health-care services into two components: Essential services would
still be funded by the federal government "up to some minimal
national standard." All other "non-core" services -- which Manning
does not define -- would be paid by individuals through, what else,
private health insurance.

Sure, the Canadian system seemed to work for a while, but it
bled money and used up as much as 10 percent of Canada's bloated
federal budget. Now provinces have amassed huge deficits and the
government is vowing to cut the GDP by 3 percent next year, in part
to combat rising tax rates. More than 50,000 public employees are
slated to lose their jobs.

Back in the United States, Medicare, which provides
taxpayer-financed health insurance to the nation's elderly, is
growing at 10 percent a year even as more and more doctors refuse
new Medicare patients. The Republicans in Congress want to slow
growth by as much as 5 percent per year, eliminating up to $300
billion of projected spending over the next seven years.

Like Canada's problems, the roots of our Medicare crisis go back
to its creation in the 1960s as an open-ended federal entitlement.
With Uncle Sam paying all bills, the private market in medical care
for the elderly was destroyed. Absent incentives to restrain the
use of services, taxpayer costs have risen relentlessly.

This was obvious in the early 1980s. But addressing the problem
at its roots has always been politically difficult. When Medicare
spending grew sharply during the Reagan administration, the White
House skirted the problem by imposing price controls. These caps,
never more than a short-term fix, were tightened under the Bush
administration. The result? According to the Congressional Budget
Office, Medicare now pays doctors and hospitals only 70 percent or
so of the real costs of services. Providers were able to tolerate
this for a while by charging more to private-insurance patients to
make up for what Medicare didn't reimburse. …